Monday, April 20, 2015

THE MARKET DOESN'T HAVE ALL THE ANSWERS

One doesn't have to come to the US to come to the conclusion that while the market might be the best creator of wealth known to man, it cannot claim the same premier position in distributing it.

In fact left to its own devices the market -- the combination of actors going about their own business in search of profit (never mind what they claim), the market tends to concentrate wealth rather than distribute it. 

We talk about China today, but the original winning development model belonged to the US. In the 20th century the average family income more than tripled. The US economy has grown to the point that it's is about equal to the sum of the next three leading economies -- China, Japan and Germany, combined.

A combination of stable internal politics that anchored strong property rights and attracted immigrants from all over the world, fueled this economic miracle which, for better or worse is the US we know today.

While this is true, the US is unfortunately the most unequal society in the developed world. Countries ranked according to the Ginii coefficient, a measure for income distributions, puts the world's leading economy at number 28, behind countries like Greece, Israel and the Czech Republic.

And it's not difficult to see why this is so.

The founding fathers of America, being businessmen, were committed to private sector led growth. It was a messy process but that commitment ensured that the sanctity of private property is indisputable -- never mind that this once included slaves, their innovations in finance have left everyone else in the dust -- even if this happened literally and figuratively, during the recent global financial crisis and finally created an environment for the the greatest minds in all endeavors to flourish and make their contribution to this economic experiment.

The results are their for all to see. 

From the huge amounts of money required to sustain the political class in Washington and around the country, to the huge outlays of capital it took to build the concrete jungles of New York and any number of major urban centers around the country and to the fantastic innovations being thought up in hundreds of universities, universities of such quality as to leave any other pretenders far in their wake.

In this same free market where it is understood that everyone has a chance, but also that not every one will make it, for those that do the rewards have been abundant. However every one is not made equal and in any human endeavor only a small minority can excel, leaving the rest to their own fate is not only inhumane, but makes the whole system unsustainable.

One can safely say that the majority of Americans recognize this. Unfortunately the minority who have the resources to maneuver though the US' political system -- a system designed specifically to guard against the concentration of power, sees a more equitable distribution of wealth detrimental to their own business interests.

"The US has an advanced system of internal conflict resolution and its unlikely that it will succumb to coups or nationwide instability, we however do not have that luxury...


The rest of us may think this is America's problems and if they want to go on blundering down that road they will reap the fruits of their own folly, but the reality is that when America gets a cold the rest of us can get Ebola.

However all is not lost. A strong push from the myriad civil society organizations is beginning to make an impression. The Internet and its offspring, social media is beginning to chip away at the influence of the powerful Interest groups at the helm so change is coming. It's inevitable and the momentum is irreversible.

For the rest of us while we allow the markets to direct economic growth, we should not abrogate our responsibility to ensure the spoils are distributed equitably by beefing up our social services, infrastructure and political processes. This cannot happen by accident.

The US may have an advanced system of internal conflict resolution and its unlikely that it will succumb to coups or nationwide instability, we however do not have that luxury.

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